The price of Bitcoin rose 13% on Wednesday following reports that Founders Fund, the San Francisco-based venture capital firm co-founded by Peter Thiel, has been buying the cryptocurrency since 2012, totaling no more than US$20 million. Those bitcoin holdings are now worth several hundred million dollars, people familiar with the matter told the Wall Street Journal.
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The firm’s bitcoin purchases have been spread across several of the its most recent funds, the persons said, including one that began investing in mid-2017 and made bitcoin one of its first investments. It is unclear if Founders Fund has sold any of its holdings.
Founders Fund has more than US$3 billion under management and has taken stakes in over 100 companies, including Facebook, Airbnb Inc. and SpaceX. The firm’s investments in the cryptocurrency space include the crypto-focused hedge funds Metastable Capital and Polychain Capital, bitcoin payment services provider BitPay and bitcoin security platform BitGo.
But the performance gap between bitcoin-related startups and bitcoin the cryptocurrency has been an upsetting topic during partner meetings at some venture firms. Several VC partners argue that a direct investment in the cryptocurrency would have been smarter than backing startups in the space. Startup shares are illiquid and take an average of seven to ten years to deliver a return. Additionally, about 90% of such companies fail.
Bitcoin on the other hand jumped about 1,400% in 2017. The cryptocurrency started the year at about US$1,000 a coin to surge to an all-time high of nearly US$20,000 in mid-December 2017 before plummeting 40% to US$12,000 towards the end of 2017.
Other prominent venture capitalists that have invested in bitcoin include Tim Draper, who bought nearly 30,000 bitcoins in a 2014 US Marshals Service auction. Draper told CNBC in December 2017 that he was still holding all these bitcoins, which are now worth about US$450 million at today’s price of US$15,000.
Winklevoss twins Cameron and Tyler became “bitcoin billionaires” in 2017 when the price of the cryptocurrency surpassed US$11,500. The brothers purchased US$11 million worth of bitcoins back in April 2013 when the cryptocurrency was at US$120.
Chamath Palihapitiya, a former Facebook executive, owned the equivalent of US$5 million in bitcoin in October 2013, according to TechCrunch, holdings that are worth now about US$375 million.